Bringing media buying in-house: Cost saver or money drain?

05 February 2019

One of the significant advertising stories of 2018 was the trend for brands to announce that they planned to move their digital ad buying operation away from their agency in order to operate it in-house, but this path has its difficulties. IPONWEB’s Shane Shevlin looks at five key considerations for in-housing media.

Over a year ago Adobe research found that nearly two out of three marketers (62%) planned to bring their programmatic media buying in-house by 2022; more recently a report by the IAB shows that nearly 40% of advertisers execute in-house programmatic trading. Both studies cited a variety of reasons, including cost savings, building in-house knowledge, data security and usage, more control of buy-side logic and increased transparency.

There’s no doubt that building an in-house programmatic adtech stack has the potential to deliver many advantages. But for all the industry discussion, stated intentions and predictions, how feasible is taking an in-house approach?

I believe any company considering it needs to weigh up a variety of considerations, including the following five points:

1. Agree the goals

Being clear about the goals of owning the programmatic activity is key – is it to gain transparency into the media buying process, to cut out adtech middlemen, to manage customer data centrally, or take ownership of the end-to-end media trading process for example?

Once this is determined, media buyers will be able to assess the most effective in-housing strategy for their needs.

For some brands, transferring the buying of advertising inventory to an internal team, utilising a few preferred partners and exercising contract control could potentially be enough . Calling this in-housing is perhaps a stretch and it is only logical that other brands will want to take full control, not just of their programmatic strategy, but also the technology and roadmap.

2. Know the benefits

Some companies may want to realise all of the advantages that building their own technology / in-housing the programmatic stack make possible. To my mind, central to this proposition are owning and customising ad decisioning and optimisation logic (i.e., where ads are placed in relation to non-advertising content and client campaign objectives), so that campaigns can be fine-tuned and their performance adjusted based on the specific goals of the business.

I’m not talking about rotating out the same tired (but still popular) optimisation strategies, but rather the type of customisation that is only possible through real-time ‘test and burn’ experimentation facilitated by customised machine learning.

Examples include the ability to swap new ‘try’ input variables (data points that can affect change to the campaign) into the machine learning model(s), or even defining composite groups of user behaviour variables and testing whether specific combinations of these have positive effects on results before scaling budgets. Opportunities like this make the allure of controlling the product roadmap too difficult to resist for many savvy brands.

For brands with the right criteria (such as: plenty of data; measurable, but highly bespoke, KPIs; and access to the right talent), building their own programmatic stack and operating it in-house can work well. The advent of cheaper cloud computing resources also means that the full in-housing option can be as cost-effective as the conventional approach and, arguably, much more economical at scale.

3. Have I got the time and money?

Let me be clear; technology development, especially at the level of complexity evident in a market renowned for evolving at breakneck speed, is often a daunting, costly and high-risk proposition. To operate successfully in real-time, a programmatic stack needs monolithic components with inherent scalability; building one from the ground up requires years of development and learning, not to mention significant investment.

Ambitious brands should look to partner with technology companies offering packages that give versatility in roadmap control, speed of execution, bespoke algorithm development (including custom ad decisioning, bid evaluation, campaign pacing, data injection, etc.) and flexible integrations. This all needs to be in a manner that removes the engineering risk, and at a fraction of the cost of an outright build or an acquisition.

4. Fighter jets need good pilots

While things like hardware and roadmap management are major considerations, they are far from the only obstacles. Acquiring, training and retaining the talent that will be able to operate the programmatic technology at the required level of expertise is not straightforward in a market where skills shortages are frequently talked about; fine-tuning the platform and managing day-to-day operations requires hiring (and keeping) a dedicated team. Here, many digital-first and direct-to-consumer brands have an advantage given they already have some in-house talent to manage their data.

Historically, to ensure platforms continued to grow while maintaining high calibre trading partners, companies that in-housed needed to continuously activate new partners and review existing connections – with each integration taking time and incurring costs (and legal fees). More recently services have emerged which offer commoditised, cost-effective access to and technical maintenance of trading connections, allowing companies to scale up their trading faster.

5. Agency friction generates opportunity

Much of the in-housing discussion has seen brands call out agencies on issues including hidden fees and lack of transparency across the digital advertising supply chain. But it could equally be argued that price suppression in the agency pitch environment has led to many of the questionable behaviours across the supply chain in the first place. Increasingly, smart agencies are ensuring that they themselves own or have access to the programmatic media trading technology that helps them to differentiate, and adds genuine value for their clients by solving real business problems.

(IPONWEB’s 2018 research report, Agents of Change: The Rise of the Programmatic Media Agency, showed that 49% of all advertising agencies undertake programmatic media buying with their own technology, with those that take greater control in this way seeing superior performance across a number of key media buying and measurement criteria.)

Cost-saver or money drain? It depends…

There is no definitive answer to whether bringing media buying operations in-house is a money drain or a cost-saver, worth the return in the long run. Any company considering it needs to be encouraged to question whether in-housing (and the initial upheaval it requires) is the right move for them based not just on their individual business profile, goals and the value it would ultimately create, but also on whether they have the tenacity and resilience to stay the course.